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India launches new system to pay welfare

Muneeza Naqvi

India will send billions of dollars in social welfare money directly to its poor under a new program aiming to cut out the middlemen blamed for the massive fraud that plagues the system.

Previously officials only handed out cash to the poor after taking a cut - if they didn't keep all of it for themselves - and were known to enrol fake recipients or register unqualified people.

The new program would see welfare money directly deposited into recipients' bank accounts and require them to prove their identity with biometric data, such as fingerprints or retina scans.

Finance Minister P Chidambaram has described the venture as "nothing less than magical", but critics accuse the government of hastily pushing through a complex program in a country where millions don't have access to electricity or paved roads, let alone a local bank.

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The program is loosely based on Brazil's widely praised Bolsa Familia program, which has helped lift more than 19 million people out of poverty since 2003.

It begins in 20 of the country's 640 districts on Tuesday, affecting more than 200,000 recipients, and will be progressively rolled out in other areas in the coming months, Chidambaram said on Monday.

The country has 440 million people living below the poverty line.

As a first step, the government has said it plans to begin directly transferring money it would spend on programs such as scholarships and pensions.

Eventually the transfers are expected to help fix much of the rest of India's welfare spending, though Chidambaram said the government's massive food, kerosene and fertiliser distribution networks - which are blamed for much of the corruption and lost money - would be exempt.

The program will eliminate middlemen and transfer cash directly into bank accounts using data from Aadhar, a government project working to give every Indian identification numbers linked to fingerprints and retina scans. Currently hundreds of millions of Indians have no identity documents.

On Monday, 208 activists and scholars published an open letter expressing concern that the government was forcing the poor to enroll in Aadhar to get welfare benefits without putting safeguards in place to protect their privacy.

But Mihir Shah, a member of India's Planning Commission said many critics had confused the lack of readiness with flaws in the plan itself.

"My question to them is is it better than what is there today? That is the only way we can judge policy. I don't think there's a perfect solution to any of mankind's problems," he said.